food for thought

Look at the following two scenarios and see for yourself what it means:
· Which would you prefer:
o A sure loss of $9000 or
o A 5% chance of no loss at all and a 95% chance of $10000.
· Which one your prefer:
o Sure gain of 9000 or
o A 95% chance of a $10000 gain plus a 5% chance of no gain at all.
In the first case More than 80% of the public does not pick the sure loss and picks the risky gamble which works out be a bigger loss (9500).
In the second case more than 80% of the population picks up the sure gain which works out to be less profitable (9000) whereas the second option is a gain of 9500.

Lately, market volatility has been cutting through trader's accounts like butter. I know this for a few reasons. First - I have access to information on the dealer side and retail accounts are getting hammered (more than usual ;) Second - I am getting a flood of emails from frustrated traders. Finally - traffic and trading volume from retail traders has dropped off since last Friday. This happens every time the market adjusts like this. Each time is another opportunity to learn a little more.

I find that one of the problems that many traders deal with during these periods is that they try to treat it like the previous trend. Not all volatility is the same. For example, long term traders can have tight stops when the market is trending like crazy but once it is clear that the market is going to get a little wild it is time to reconsider the width of your stops or trading strategy. Otherwise you are putting yourself at a disadvantage.

source: forex factory